48 HOURS IN EDMONTON. October 2014

Transcription

1 48 HOURS IN EDMONTON October 2014

2 FORWARD-LOOKING STATEMENTS Today s discussion may contain forward-looking statements that involve assumptions and estimates that may not be realized and other risks and uncertainties. These statements relate to future events or future performance and reflect management s current expectations and assumptions which are based on information currently available to the Company s management. The forward-looking statements include but are not limited to: (i) the ability of the Company to meet contractual obligations through cash flow generated from operations, (ii) the expectation that customer support revenues will grow following the warranty period on new machine sales and (iii) the outlook for There is significant risk that forward-looking statements will not prove to be accurate. These statements are based on a number of assumptions, including, but not limited to, continued demand for Strongco s products and services. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward looking statements. The inclusion of this information should not be regarded as a representation of the Company or any other person that the anticipated results will be achieved and investors are cautioned not to place undue reliance on such information. These forward-looking statements are made as of the date of this presentation, or as otherwise stated and the Company does not assume any obligation to update or revise them to reflect new events or circumstances. Additional information, including the Company s financial statements, Management Discussion and Analysis, and Annual Information Form, may be found on SEDAR at sedar.com. 1

3 INVESTMENT HIGHLIGHTS Strong growth strategy Well-positioned in diversified and growing markets Major Capex, sales re-organization completed Globally recognized manufacturers Strong customer relationships Demonstrated performance improvement and results 2

4 AN INDUSTRY LEADER Major multiline mobile equipment dealer Major brands: sales and product support Diversified by industry, geography and product line 27 branches in Canada, 5 branches in U.S. 750 employees TSX: SQP 3

5 BRAND RECOGNITION MAJOR BRANDS CONSTRUCTION 4

6 STRONG OEM RELATIONSHIPS VOLVO S LARGEST NORTH AMERICAN DEALER in 2013 FOR 5 YEARS RUNNING RECOGNIZED AS LARGEST PRODUCER OF RETAIL FINANCING FOR VOLVO FINANCE MANITOWOC CRANE ELITE DEALER 5

7 6 BRAND RECOGNITION COMPLEMENTARY BRANDS

8 REVENUE CATEGORIES SALES RENTAL PRODUCT SUPPORT 7

9 8 EXTENSIVE BRANCH NETWORK

10 DIVERSE END-USE MARKETS Non-Residential Construction Residential Construction and Landscaping Oil & Gas Mining Quarries and Aggregates Forestry Utilities Infrastructure Industrial Material Handling Waste Management 9

11 VALUE AND GROWTH POTENTIAL REVENUE GROWTH Total revenues up 5% in 2013 and 1% YTD (June 2014) Product support revenues increased 5% in 2013 and 6% YTD (June 2014) ROBUST ORDER BOOK $72M at December 31, 2012 $52M at December 31, 2013 $62M at September 30, 2014 LOWER OUTSTANDING DEBT LEVELS Total outstanding debt decreased $18M since September 30, 2013 Net proceeds from sale and leaseback transactions contributed $42M in debt reduction Interest-bearing portion of equipment notes down $22M (year-over-year, September 2014) IMPROVING ECONOMY Modest growth forecast for 2014 in Canada and United States ORGANIC GROWTH INVESTMENTS IN KEY MARKETS Increased operating capacity with new and upgraded facilities ACQUISITION OPPORTUNITIES Consolidation of equipment dealers Other related businesses POSITIVE LONG-TERM OUTLOOK Infrastructure deficit across Canada Substantial development planned for northern Alberta, northern Ontario, northern Quebec and Labrador 10

12 11 ALBERTA STRATEGY

13 FINANCIAL TREND ALBERTA ALBERTA REVENUE ($ millions) Equipment Rentals Product Support Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3E

14 GROWTH STRATEGY ORGANIC NORTHERN ALBERTA STRATEGY EDMONTON VOLVO (Acheson) EDMONTON CRANE FORT MCMURRAY Volvo branch opened March 2012 Capital investment of $10.7M Enabled significant growth in product support revenues Improved customer service Existing Edmonton branch upgraded in 2013 and now dedicated to crane Capital investment of $1.2M Enable significant growth in Crane product support revenues Improved customer service Regional management structure added New branch opened in 2014 Capital investment of $18.7M Directly service the oil patch New branch will carry Volvo and crane products Headcount currently in place: - branch manager - branch administrator - service manager - 7 field technicians - 4 parts/warehouse 13

15 DISTRIBUTION WESTERN CANADA Strongco Branches - 6 Sub dealer Locations - 17 FORT MCMURRAY GRAND PRAIRIE EDMONTON LLOYDMINSTER RED DEER SURREY PENTICTON CALGARY SASKATOON BROOKS MEDICINE HAT LETHBRIDGE REGINA WEYBURN WINNIPEG 14

16 ECONOMIC OUTLOOK IN ALBERTA POSITIVE ALBERTA ECONOMICS FORECAST Annual average per cent change unless noted E 2014F 2015F Real GDP Nominal GDP Employment Unemployment Rate % Consumer Price Index Retail Trade Housing Starts Existing Home Sales Avg. Existing Home Price Source: Statistics Canada / Haver Analytics 15

17 ECONOMIC OUTLOOK IN ALBERTA POSITIVE Population Forecast (in MM of Inhabitants) AB 4,003 4,083 4,162 4,242 4,629 QC 8,103 8,169 8,235 8,299 8,607 ON 13,737 13,904 14,069 14,234 15,050 ALT 2,349 2,352 2,355 2,358 2,373 SQP Regions 28,191 28,507 28,821 29,133 30,659 % Growth 1.1% 1.1% 1.1% 2.2% Value of Total Construction (Current MM of Can$) Source: Statistics Canada Atlantic 14,624 14,496 16,398 17,397 18,713 20,214 Quebec 44,212 46,923 49,833 51,685 54,985 58,720 Ontario 69,301 71,391 75,764 77,699 82,868 89,132 Alberta 61,026 69,737 78,572 84,593 92, ,882 SQP Total 189, , , , , ,948 Total 243, , , , , ,802 SQP as % of Canada 78% 78% 78% 77% 77% 77% Y O Year Real Growth SQP 3.9% 5.5% 1.5% 3.7% 4.1% Canada GDP Real Growth 2.5% 1.9% 1.5% 2.0% 2.9% Source: Reed Construction Data 16

18 ECONOMIC OUTLOOK IN ALBERTA POSITIVE CONTINUED GROWTH IN OIL SANDS Oil Sands Mining Oil Sand in Situ Forecasted Bitumen Volumes Recent forecasts project an increase in production of oil sands operations to 5 million barrels/day by 2030 a 210% increase over 2011 levels Total mined bitumen volumes expected to double by 2027 Source: Canadian Association of Petroleum Producers 17

19 GROWTH STRATEGY

20 BENEFITS OF SCALE OEM preference for larger, financially strong, professionally managed dealers Ability to attract complementary brands More efficient use of capital; more effective use of overhead Improved inventory management equipment sharing, parts rationalization Sharing of best practices Optimum use of the most advanced computer management systems More sophisticated sales and marketing organization Brand recognition of Strongco UNIQUELY POSITIONED TO BENEFIT FROM INDUSTRY CONSOLIDATION 19

21 GROWTH STRATEGY ORGANIC Increase market penetration of brands represented Add key brands to service customers and increase throughput Enhance market presence ACQUISITION Acquire dealerships Focus on brands already represented Target regions close to existing markets Improve operations 20

22 CAPEX LARGELY COMPLETE ($ millions) $33.6 Major Capital Expenditures 2011 to 2014: New Acheson Branch $10.7 million $9.0 $5.9 $9.0 New Fort McMurray Branch $18.7 million New Saint-Augustin Branch $8.9 million Upgrade Edmonton Crane Branch $1.2 million Renovations Mississauga Branch $1.4 million New Dealer Management System (SAP) $5.7 million $0.7 $ E No major capital expenditures planned for 2014 beyond completion of SAP implementation 21

23 22 FINANCIAL RESULTS

24 FINANCIALS REVENUE ($ millions) EARNINGS BEFORE TAXES ($ millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

25 FINANCIALS EBITDA ($ 000s) EBITDA MARGIN (%) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, % 12% 10% 8% 6% 4% 2% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

26 2013 REVENUE BREAKDOWN REVENUE BY CATEGORY ($ MILLIONS) $321.2 Equipment Sales 66% EQUIPMENT SALES BY BRAND $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY BUSINESS UNIT Multiline 55% PARTS REVENUE BY BRAND Case 7% Crane 26% Chadwick-BaRoss 12% Case 7% Case 6% Volvo 49% Manitowoc 26% Volvo 58% Manitowoc 9% Used 1% Other 26% Used 7% Other 11% 25

27 FOCUS ON INVENTORY MANAGEMENT EQUIPMENT INVENTORY ($ millions) Estimate EQUIPMENT NOTES PAYABLE (%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4E Interest Free Interest Bearing Estimate 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4E

28 FOCUS ON DEBT REDUCTION Q Q3 2014E ($ millions) $287.5 $285.5 $287.3 $288.3 $272.2 $267.9 $18M Reduction $259.5 Q Q Q Q Q Q Q3 2014E Net proceeds from sale and leaseback transactions contributed $42M in debt reduction Interest-bearing portion of equipment notes down $22M (year-over-year, September 2014) 27

29 SHARE OWNERSHIP LISTED ON TSX (SQP) 13.2 Million Shares Outstanding Others 54.3% Oakwest Corporation (Robert Beutel - Chairman) 22.4% Boeckh Investments 12.8% Strongco Insiders 2.8% Fidelity Management 7.7% 28

30 STRATEGIC FOCUS 1 Continue revenue and market share growth through enhanced presence and improved customer experience in key markets 2 Move beyond the launch phase of our new facilities and sales organization to reach the bottom line, and realize ROI 3 Focus on inventory management to reduce ongoing debt levels and costs 4 Improve operating efficiencies 5 Continue to identify opportunities to accelerate growth (organic and external), to leverage Strongco s scale and strong reputation in the marketplace 29

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